Individual plots the future

Sandy Adam has built Springfield Properties into one of Scotland’s fastest-growing and most respected house builders. He talks to Kenny Kemp about his motives.

Everyone in Scotland should have a decent place to live. That’s the kind of statement you might expect from a Big Issue seller, an earnest anti-capitalist protester camped out in St Andrew Square, or a headline-seeking MSP.

But Sandy Adam, chairman of Springfield Properties, is an entrepreneurial housebuilder who not only talks the talk, but is doing something positive about it.

This gently-spoken Morayshire man, who is 55, has grown his businesses in Scotland to a turnover of £40m, creating both value-formoney homes and jobs.

His company is building hundreds of award-winning, affordable homes that are of high quality and recognised as decent places to live.

“I’m not really a house builder,” he says. “I’m trained in agriculture, but I know how to run companies. I’m interested in growth. My question is; how far can this company go and what can we grow it to? That applies to all the companies in the Springfield group. Good people seem to like working with me – I try not to interfere too much. People are capable of doing a lot more than they think they can if you just tell them they can do it – and encourage them.” So when he says everyone deserves a good home, it’s not because he’s joined the Militant Tendency, it’s his viewpoint and method of working. Springfield Properties might not be one of the largest mass-market builder but it has built a strong reputation with housing associations as well as with private home owners. So, what are the qualities of a good new home in Scotland? “The first thing is location,” says Adam who is sitting in the board room of his new Larbert office.

“Then it’s the attractiveness of the street scene. Then it’s the design and the space in the house and the quality of the build. Then it’s the quality of the after-sales. You have to be good at all of these things.

“The public are right to be demanding because this is the largest purchase they are going to make – or are ever going to make. They are going to be staying in it every day – and we should give them a good quality product.” He is committed to quality, whether it is private or local authority.

“If you walked into some of the housing we are building for local authorities right now, you would be amazed by the standard. In some cases, they are a far higher standard than we build for private clients, because of the specification that we are required to build homes with special needs. And you could not tell the difference between a council house and a private house. On some estates they are mixed together, and, unless you specifically knew, you could not tell the difference.”

Sandy Adam was born in Elgin and raised on a farm on the south side of town. It was a mixed farm of cattle and crops, a fertile area, and as he grew up he learned how to undertake the farming chores, including driving a tractor. It instilled in him a practical work ethic of getting things done – and fixing things when they didn’t work.

His grandfather also owned a local market garden called Springfield, which had been established in 1956, long before the arrival of Bart Simpson and his family! Sandy went to New Elgin Primary School, was sent to Strathallan in Perthshire, and took an HND in agriculture at Aberdeen College.

After a gap year touring the world and working on farms in New Zealand, he returned to Morayshire in 1979 and moved into a small rented farm of 150 acres in the Elgin area.

After three years, with the help of his family, he bought a 700-acre upland farm, just outside Craigellachie, near the river Spey.

It is a beautiful hillside spot in one of the most fertile parts of Scotland, but taking on the debt for the farm proved to be a massive burden for Sandy Adam, an early lesson for later years.

The interest rates were punishing and he struggled for many years.“We didn’t have a lot of excess cash to spend or to live on,” he says. “It was a mixed farm of cattle, sheep and crops. It was a tough time.” He married Anne, then a teacher, in 1983 and they started a family.

“Gradually, we started to move into property and we sold a couple of sites on the farm,” he says.

“I enjoyed the experience of putting it through local planning with Moray Council. We sold the sites, then our market garden became uneconomic and ceased operating. A new Asda store opened up nearby and the cost of goods from overseas was rising. The 10-acre site was zoned for housing and we tried to sell it to a local builder – but it didn’t work.”

So Adam decided to develop it himself – and this became the foundation of Springfield Properties.

“I was always working on my own – my father, Duncan Adam, was a very strong character, like myself, but we would never have worked in the same business. It was better that we had separate businesses.”

There was a need for a lot of new homes in Moray – which was the heartland of the Speyside whisky industry; home to the air bases at Lossiemouth and Kinloss, and with a rich farming pedigree which supported a number of food and drinks-based companies. So Adam built 100 homes on the 10-acre site – and sold them all.

He says: “I enjoyed it and it seemed to be successful, so we started buying other bits of land. After a few years, I was spending most of my time running around architects’ firms, getting plans and I decided it was time to take on an architect myself and open an office in Elgin.”

In 1996, he took John Main, a newlygraduated architect, and between the two they built Springfield Properties up to about 300 employees with a turnover of £20m.

“I was always interested in quality and giving people space to live – and value for money,” says Adam.

“The density of our housing on plots is much less than with the major listed house builders. We did various projects but all in the Moray area. Through the first ten years we went through a booming time in the house building industry in Scotland. We were very successful.”

Then, in October 2006, Adam and Main sensed that something was amiss in the wider markets.

“Our strategy had been ‘Grow, grow, grow!’ We decided that there was a bubble forming in the property market, there were various signs that we could tell this was happening.” When they announced they were releasing another phase, people were queuing for three days to buy their houses and blocks of flats were selling out within an hour. It was an ominous sign for a canny farmer who had once been burdened with debt.

“Some of our customers were able to get 125% mortgages,” he recalls. “The price of development land was spiralling out of control and banks were throwing money at anything that was property related.”

Springfield Properties was banking with HBOS, who had a massive exposure to property across the UK and they were desperately keen to keep lending to Adam’s business.

“Alarm bells were ringing and we decided to have a change of strategy,” he says. “We tried to put the business on a footing that would survive the inevitable downturn. But we could never have foreseen just how deep and long that downturn would be.” Springfield stopped buying expensive land; sold a third of its existing land bank, and built homes to order.

“We tied up missives tighter and we ran the company for cash,” he says. “Fairly quickly we were in a cash-positive situation. One of the other things we did was move into affordable housing in a big way. It was government money and we could tie up longer-term contracts.” Adam was even accused by his bank manager of not borrowing much money.

“I thought it was strange and I remember replying: ‘When I want to borrow, you won’t want to lend.’ That’s the situation we have now.” What does he put his foresight down to? “I had seen a crash before in the early 1990s. I was involved in the property market at the time and I saw how difficult it was then. And I remembered how hard it was when inflation was in double-figures. Since our farming days, when we had five really hard years, I’ve always been cautious.”

Springfield Properties had never borrowed large amounts from the banks. Once the company was on this better footing, not much happened throughout early 2007.

“However, we began to look a bit foolish,” he says. “And we began to wonder if we had done the right thing. We stood firm though and conserved our cash. The crisis with Northern Rock, then with Lehman Brothers’ collapse in 2008 led to property prices stabilising, then falling, and the terrible situation with HBOS, Lloyds and RBS and government bailout for the banks. We found ourselves in a very unusual position in the Scottish house building industry in that our business was relatively safe and not beholden to the banks.” Three years into the crash, Springfield Properties turnover was still growing because of all the affordable housing contracts. It was the fastest-growing independent Scottish house builder and in May 2011 announced results of £40m, up from £34m, and profits of £2.5m, up from £1.8m.

“Because we had moved into affordable housing early, housing associations were comfortable dealing with us,” he says.

“We got more and more projects and this helped our turnover grow. We began to realise that with the tightening of government funding, affordable housing was an easy target for cuts. A lot of the funding on the housing has dried up. If we wanted to protect the size of our business, we couldn’t afford to rely anymore on affordable housing. We needed another strategy before the contracts ran out, so we decided to spread our geographical area.”

In January 2010, John Main, still only 37, announced his decision to leave and start up his own company, with Sandy Adam expressing regret at his departure.

Springfield Properties took on Sandy Anderson, who was the former managing director and chairman of Bett Homes. He was a highly-regarded housing professional who had grown Bett Homes from 200 to 1,500 houses a year.

He was appointed managing director in February 2010, with the remit to grow the company in Central Scotland from a rented office in Stirling.

Springfield Properties, now with finance from HSBC, managed to secure around half-adozen sites in Central Scotland – including some in Edinburgh, Broxburn, West Linton, and Blairgowrie, and then came an opportunity that was too hard to resist.

“We were going well and then Redrow announced in the newspapers that they were planning to sell their Scottish division,” says Adam.

“At first I thought it was going to be too big for us, but encouraged by the directors we put in a bid which was structured, so we didn’t have to borrow any more at all.”

The offer was for £49m, with a £5m deposit, and the rest payable when the houses were sold. This was attractive to Redrow, who didn’t want to sell to any of their major UK competitors, and it gave Springfield Properties a bigger footprint in Central Scotland.

“We were able to tie up a deal and we’re now working on eight Redrow sites in Scotland, six in the west and two in the east – a total of 831 houses,” says Adam. The amalgamation has meant a few redundancies and Springfield is working hard to instil its own ways of working.

“We believe we should build the house that the customer wants – not the customer having to buy what we want to produce,” says Adam.

“This is basic business for us. The motor car industry has moved on a lot since Henry Ford said you can have any colour as long as it’s black. The car industry has changed, but not the house-building industry. The choice should be same for a house. We’re building bespoke houses.” Springfield is aiming to build 400-500 a year with every one being different.

“We always like to be a step ahead of building control regulations. On energy efficiency and carbon footprint, we have been looking in-house at this. Our team has decided that air-source heat pumps and under-floor heating is the best way to go.”

An air source heat pump – or ASHP – is like an air-condition unit on the side of the house and works in the opposite way to a refrigerator, extracting ambient heat from the outside air, even when the temperature is less than -20°C.

Adam says: “The housing associations have really embraced this technology; one association in Elgin has 250 houses, all with air source heat pumps. But the best way to conserve heat is to ensure that there is enough insulation.

“The houses are mainly timber-framed – drier Canadian and Scandinavian wood is shipped in because it is better for housing than wet Scottish pine. An old ‘tatty’ shed on the farm now makes the timber kits, employing four people. That land has been zoned for housing, so we’ve bought another ‘tatty’ shed.” What is the biggest issue for Springfield Properties?

“The main issue is our customers getting mortgages. The UK’s financial guys haven’t got themselves sorted out yet. The sooner that happens, the sooner we can get back to normal. We have huge shortages of houses in Scotland.”

The Scottish Government aims to increase the number of new homes built in Scotland each year to 35,000 by 2015. Last year the figure for the private sector was a meagre 11,000, which means there is a massive amount of pent-up demand. Housing production in Scotland is now at its lowest level since 1931.

“We have been one of the pioneers of the Resonance scheme, which was developed by Retties in Edinburgh. It provides affordable housing with a model where we will sell houses to the housing association at a reduced price; they keep a percentage of the homes in perpetuity and we have the right to buy the rest of them back at the same price any time within 10 years. From a housing association’s point of view, they get an affordable house for up to 10 years for a client and they collect the rent, which pays the interest on their loan. The loan is repaid when Springfield buys back the property.”

This scheme has recently won a UK award for Springfield, Retties and Dunedin Canmore from the Chartered Institute of Housing for excellence in housing finance. In the last financial year, Springfield’s turnover has been 60-70% through affordable housing for housing associations.

“The other difficulty we have in Scotland is planning,” says Adam. “There has been a change in the last few years from the most go-ahead councils, who have changed the outlook of their planners from ‘control and restrict’ and more to ‘encourage and enable’. We now see huge differences between some planning authorities and others.” According to Sandy Adam, Edinburgh City Council, East Lothian and Highland are among the ‘good’ guys, and all pro-active in encouraging development.

“They tend to take the hurdle out of your way, instead of putting them in your way. I’m in the position where I can invest my money in any area of Scotland that I want. I’m more encouraged to go to areas where the planning authorities are more encouraging.” But that’s not necessarily the areas that need the houses. The Springfield board includes the two Sandys; Sandy Adam and Sandy Anderson, who was awarded an OBE in 2004 for services to construction in Scotland.

Finance director Innes Smith, a former KPMG-trained accountant who is from Moray, has been with the firm for seven years.

“He jealously guards the company’s money, which is exactly what you want a finance director to do,” says Adam. Bob MacLeod is in charge of all the civil engineering works.

“Everything above the ground is a totally known cost – you can quantify it,” says Adam. “Anything under the ground is an unknown quantity, so an essential aspect of our business is civil engineering with sewers and roads. Bob’s a key member of the team.” Also on the board is Sandy’s brother, James and his wife Anne, who represent the family shareholders and two non executive directors, Roger Eddie, a former HBOS banker and now with HSBC, and Matthew Benson from Retties.

Another key figure for Springfield’s is Colin Murchison, formerly with Redrow, who has become the commercial director, although this is not a board position.

Springfield Properties employs 250 directly, with up to 600 people including contractors, many of them regulars.

For example, Elgin plumber Neil Hadden began working with Springfield in the 1990s and his business has grown alongside it.

Adam is an on-the-go serial entrepreneur with 14 other business interests.

While he’s given up farming – and Springfield Properties is by far his largest company – he has invested in a variety of other companies and their people.

He has an asbestos surveying company called Northern Asbestos Services and run by Mark Watkins.

There is also Planet BBK, a bathroom retailer in Aberdeen and Elgin, which was going through a tough time.

He also has two companies in Berlin, Spree Properties and Elgin Properties.

Sandy Adam relaxes with a game of golf on Sunday mornings at Elgin & Moray Golf Club.

“Golf is a game for everybody in Scotland, so some of my joiners and labourer are members of the golf club as well,” he says.

Elgin and Moray has a distinct local identity with strong networks so when he goes to a business dinner he meets senior figures from Walkers of Aberlour, Johnstons of Elgin, Baxters of Fochabers and Gordon & MacPhail, all well-run family businesses, embedded in the area.

Springfield Properties is in this mould, but with expansion in the Central Belt, more people are likely to hear about the ethos and values of Sandy Adam.